C-Level fraud prevention: why CFOs shouldn’t tackle it alone
At the C-level, executives carry a high degree of responsibility, with CFOs in particular required to look after the financial viability of companies, meaning the bottom line. So, for chief financial officers, preventing fraud and the associated losses is typically at the top of their list of priorities.
Handling fraud prevention internally is one option. However, fraud prevention is a broad and complicated topic, and many choose to get outside help. In this article, we discuss why fraud is so threatening to the bottom line, why involving fraud experts is important and what to look for in a fraud prevention solution.
Fraud is on the up
A mix of factors is pushing up levels of fraud, especially card not present (CNP) fraud. These factors include the growing popularity of ordering online as well as the increasingly sophisticated tactics deployed by hackers. Statistics support this assertion, with the FICO analyses of fraud trends in Europe showing marked increases in card fraud in 2016, year-on-year, across most countries.
The risk factors are broad, and it can be difficult for merchants to protect every single aspect of their business. As much as fraud can quickly build into big losses, ecommerce fraud protection that includes chargeback guarantees, for example, can help mitigate its negative impact.
Why getting help matters
Fraud comes in many shapes and forms, and the intellectual and computing power behind fraud rings are daunting. Large operations that can maintain sophisticated internal anti-fraud operations with large teams may stand a chance, but for most businesses employing a large head count, fighting fraud may not seem realistic. At the same time, one or two employees will struggle to fulfill anti-fraud duties on all levels as fraud protection is a highly complex skill.
The alternative is to outsource fraud protection responsibilities to a reputable firm that has the broad experience and background to cover ecommerce operations end to end. These capabilities often include automated offerings which are driven by machine learning, which enables fraud protection systems to build actionable knowledge in the live threat environment far faster than internal staff working on fraud prevention could hope to.
Outsourcing fraud protection need not involve daunting costs either. Solutions are typically priced by transaction volume, so smaller merchants can benefit too as their online store is simply plugged into an existing, functioning platform. CFOs should also keep in mind that any costs incurred in implementing an anti-fraud solution could very well be recouped in short order thanks to the effectiveness of many fraud protection systems. By spending a little to prevent fraud, CFOs could save significantly by no longer incurring fraud-related losses to the extent they have in the past.
Choosing a fraud prevention solution
Obviously, not all providers can offer equally capable and cost-effective protection. It’s worth noting that a good solution will not only ensure that fraudulent transactions are blocked, but will also ensure that false positives are kept to a minimum. False positives, where a legitimate transaction is incorrectly blocked as suspected fraud, can be costly as merchants lose not only that instance of revenue – but potentially the customer, for life.
Fortunately, the better fraud prevention solutions use sophisticated mechanisms to prevent false positives and to only block transactions which are truly threatening. Much of this capability is based on the data pool the provider has access to, and the technology employed, with machine learning offering a particular advantage.
Fraud detection capability and the avoidance of false positives are possibly the most important factors to watch out for, but CFOs should also consider other factors including the reporting capabilities of the fraud solution. While outsourcing fraud protection is the right choice for many companies, this does not mean that senior staff should remain unaware of their exposure to fraud, and reporting capabilities are therefore essential.
Finally, a protection guarantee of some sort is a strong signal that a provider can offer very effective fraud prevention. For example, some vendors provide a chargeback guarantee that protects the merchant in case of chargebacks due to CNP fraud that slipped through the net of protection. Some providers will even go as far as offering chargeback guarantees against friendly fraud chargebacks.
The bigger the better
There is no question that fraud prevention and protection should be at the top of the agenda for CFOs at ecommerce merchants around the world. But how much of this responsibility should be handled in-house? The breadth and intensity of fraud risks point to the need for large teams and extensive expertise to achieve effective fraud prevention. For this reason, CFOs should consider employing qualified fraud prevention partners that can make use of their broad experience and pooled knowledge to effectively stop fraud.
